dynamic environment of international trade

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The Dynamic Environment of International Trade. : 

CH: 2 The Dynamic Environment of International Trade. Presented by: Kashif Javed Roll No. 23 1

CHAPTER OUTLINE : 

CHAPTER OUTLINE Global perspectives: Trade barriers-An international market minefield. The twentieth to twenty first century: World trade & US multinationals. The first decade of the twenty first century & beyond. Balance of payments Easing the trade restriction. General agreement on trade & Tariff - GATT 2

CHAPTER OUTLINE : 

CHAPTER OUTLINE World trade organization – WTO Skirting the spirit of GATT & WTO The international Monetary fund & world bank group Protest against Global institutions 3

CHAPTER LEARNING OBJECTIVE : 

CHAPTER LEARNING OBJECTIVE Basis for reestablishment of the world following World war two. Importance of balance of payment figure on world economy Effect of protectionism on world trade Seven types of trade barriers Importance of GATT & WTO Emergence of IMF & World bank group 4

TWENTITH TO TWENTY FIRST CENTURY : 

TWENTITH TO TWENTY FIRST CENTURY First half of twentieth century Depression World war 1 & World war 2 Last half of twentieth century Marshall plan Establishment of GATT Formation of WTO Formation of IMF & world bank World bank estimation regarding India, Brazil, Indonesia, china & Russia 5

WORLD TRADE & US MNCs : 

WORLD TRADE & US MNCs Era between 1950 to 1960 Problem faced in era of 1960 Resistance to direst investments Increasing competition in export marketing Major threats NIC –Newly industrialized countries SOE –state owned enterprise 6

WORLD TRDE & US MNC,s : 

WORLD TRDE & US MNC,s Balance of Merchandise trade US trade deficient US encouraging efforts for open trade Role model as open market AFTA – Anemia free trade area GATT – General agreement on tariff & trade WTO – World trade organization APEC – Asia pacific economic cooperation conference 7

FIRST DEACDE OF TWENTY FIRST CENTURY : 

FIRST DEACDE OF TWENTY FIRST CENTURY NIC – Newly industrialized countries World bank estimation regarding new emerging countries Brazil, India & Indonesia OECD – Organization of economic cooperation devolvement Changes in intensity of competition Emerging markets Regional trade areas Established market in Europe, Japan & US 8

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS The system of accounts that records a nations’ international financial transactions is called its balance of payments. Record financial transactions ------- usually for one year. Record maintained on double entry book keeping system. It is record of condition, not a determinant of condition. 9

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS Basically it presents; Overall view of a nations’ international economic position. Difference between receipt from foreign countries on one side and payments to them on the other. 10

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS An important economic measure used by; Treasuries Central banks & other government agencies Responsible to maintain external and internal economic stability. 11

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS Plus side of US balance of paymets; Merchandise export sales. Money spent by foreign tourists. Payments to US for insurance. Transportation and similar services. Payments of dividends and interest on investment abroad. Return on capital invested abroad. New foreign investmets in US. Foreign Govt. paymets to the US. 12

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS Minus side of US balance of payments; Cost of goods imported. Spending by the US tourists overseas. Cost of foreign military and economic aid. 13 Payments Receipts International Deficit Export More tourists from outside The Balance;

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS Include 3 types of accounts; Current account (Important) Record--- merchandise import, export, services, unilateral transfer of funds. Capital account Record--- direct investment, portfolio investment, short term capital movement to and from the countries. 14

BALANCE OF PAYMENTS : 

BALANCE OF PAYMENTS Include 3 types of accounts; Reserves account Records--- import and export of gold, increase of decrease in foreign exchange, increase or decrease in liabilities to foreign central bank. 15

PROTECTIONISM : 

PROTECTIONISM The tariffs, quotas and non-tariff barriers designed to protect a country‘s market from intrusion by foreign countries. WTO role. Nations utilize legal, exchange and psychological barriers to restrain entry of unwanted goods. While arguing for protection, the basic economic advantages of international trade are ignored. 16

PROTECTIONISM (Protection Logic and Illogic) : 

PROTECTIONISM (Protection Logic and Illogic) Arguments by protectionists supporting Govt. restrictions on trade. Economists recognize as valid; Protection of infant industry National defense Industrialization of underdeveloped countries. Most protectionists argue the need for tariffs in one of above 3. 17

Slide 18: 

Arguments by protectionists supporting Govt. restrictions on trade. Others Protection of home market Need to keep money at home Encouragement of capital accumulation. Maintenance of standards of living and wages. Conservation of natural resources (Environmental consciousness) Maintenance of employment and reduction of unemployment (proponents) Increase of business size Retaliation and bargaining Etc. 18 PROTECTIONISM (Protection Logic and Illogic)

Slide 19: 

Certain barriers are established by the Govt. to encourage the development of domestic industry and protect the existing industry. Imposed against import and foreign business. Inspiration may be economical or political Encouraged by local industry 19 PROTECTIONISM (Barriers)

Slide 20: 

Tariffs; (arbitrary, discriminatory and require supervision) Tax imposed by Govt. on goods entering the border. Tariff; Increases Inflationary pressure Special interest privileges Govt. control and political considerations in economic matters The number of tariffs. 20 PROTECTIONISM (Barriers)

Slide 21: 

Tariff; Weaken Balance of payments Supply and demand pattern International relations (trade wars) Restrict Manufacturers supply source Choice available to consumers competitions 21 PROTECTIONISM (Barriers)

Slide 22: 

Quotas Specific unit or dollar limit applied to a particular type of good. Put absolute restriction on quantity of a specific good to be imported. Like tariff, quota tend to increase price. Great Britin------ limits imported television sets Germany ------ quotas on Japenese ball bearings Italy ------ Japenese motorcycles US ------ Sugar , textile etc. 22 PROTECTIONISM (Barriers)

Slide 23: 

Voluntary Export Restraints (VERs) Orderly Market Aggrements (OMSs) Aggrement between the importing country and exporting country for a restrictions on volume of exports. It is voluntary because the exporting country sets the limits. Under threat; stiffer quotas and tariffs being set by importing countries Japan has a VER on automobiles to US 23 PROTECTIONISM (Barriers)

EASING TRADE RESTRICTIONS : 

EASING TRADE RESTRICTIONS The omnibus trade & competitiveness act Correction of perceived in justice in trade practices Openness of new market to US goods Barriers to enter in new market Majors ongoing activities to support growth of international trade GATT WTO IMF World Bank 24 The Dynamic environment of international trade

GENERAL AGREEMENT ON TRADE & TARIFF - GATT : 

GENERAL AGREEMENT ON TRADE & TARIFF - GATT Background & history Major functions No discrimination Protection of domestic industry Consultancy will be primary method for problem solving Establishment of trade related investment measures Investment restrictions as trade barriers 25 The Dynamic environment of international trade

WORLD TRADE ORGANIZATION – WTO : 

WORLD TRADE ORGANIZATION – WTO Development as an institution Equal representation of all member states Role in product standardization & in other areas International Monetary fund Objectives & role World Bank Objectives & functions 26 The Dynamic environment of international trade

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